led by leveraged purchases of new homes automobiles, consumer debt in India as triple
d from four years earlier to Rs.6 trillion (about 15% of annual gross domestic product). After three increases by CICI Bank in its lending rate, auto loan is bursals fell in Q4 FY07 compared to he previous year; a fact confirmed by oth Bajaj Auto &Hero Honda.
For Indian banks, now is the time to reorganise their loan book. And perhaps also increase exposure to corporate borrowers for whom the current high interest rates aren’t a big deterrent as most of them are looking beyond the present business cycle. Even FM P. Chidambaram, in a meeting with bankers, asked them to rebalance their portfolio. He said, “They must rebalance their portfolio so that adequate credit at correct prices is available to productive sectors.” Saugat Bhattacharya, VP, Business & Economic research, UTI Bank agrees to an extent, “As per data available till December 2006, personal loans absorbed 29% of incremental non-food credit, mainly as loans to housing sector & ‘other retail loans. So, some banks did ride the wave of retail banking & consequently, have been too aggressive.”
The continued focus of Indian government on infrastructure & SMEs and emergence of new businesses like organised retail presents a great opportunity for Indian banks to expand horizons. In the current environment of monetary tightening & higher borrowing cost, those banks which focus on cost effective resource mobilization will hold the key till the time Y. V. Reddy finally can see the light.
d from four years earlier to Rs.6 trillion (about 15% of annual gross domestic product). After three increases by CICI Bank in its lending rate, auto loan is bursals fell in Q4 FY07 compared to he previous year; a fact confirmed by oth Bajaj Auto &Hero Honda.For Indian banks, now is the time to reorganise their loan book. And perhaps also increase exposure to corporate borrowers for whom the current high interest rates aren’t a big deterrent as most of them are looking beyond the present business cycle. Even FM P. Chidambaram, in a meeting with bankers, asked them to rebalance their portfolio. He said, “They must rebalance their portfolio so that adequate credit at correct prices is available to productive sectors.” Saugat Bhattacharya, VP, Business & Economic research, UTI Bank agrees to an extent, “As per data available till December 2006, personal loans absorbed 29% of incremental non-food credit, mainly as loans to housing sector & ‘other retail loans. So, some banks did ride the wave of retail banking & consequently, have been too aggressive.”
The continued focus of Indian government on infrastructure & SMEs and emergence of new businesses like organised retail presents a great opportunity for Indian banks to expand horizons. In the current environment of monetary tightening & higher borrowing cost, those banks which focus on cost effective resource mobilization will hold the key till the time Y. V. Reddy finally can see the light.
Source : IIPM Editorial, 2007
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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